2 Top Canadian Stocks to Keep Watch on Going Into Q4 2021

Great-West Lifeco (TSX:GWO) and Aritzia (TSX:ATZ) are great Canadian stocks that investors should watch, as the selloff looks to deepen going into Q4 2021.

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Investors are bidding farewell to September and the third quarter (Q3) of 2021. But don’t expect the uncertainties or volatility to subside anytime soon. October tends to be a spooky month for Canadian stocks, and this year, the stage looks to be set for yet another rocky road. Still, investors should continue to pick away at the many names that have already suffered corrections well north of the broader indices. Like it or not, a considerable amount of quality Canadian stocks have fallen further than the TSX Index. Many have been unfairly dragged down, and it’s these names that investors may wish to scoop up on weakness, regardless of what the pundits say we’re in for the last quarter of the year.

Undoubtedly, investors are pretty split as to what to expect. Will we get an incredible rally, as bullish big bank strategists believe? Or is the road ahead a bumpier one than the one that lies behind us? It’s probably a combination of the two. In any case, here are two top Canadian stocks that I’d look to buy on any continued weakness in the back half of the year.

Consider Great-West Lifeco (TSX:GWO) and Aritzia (TSX:ATZ): a hard-hit financial with a handsome dividend yield of 4.6% and a promising, high-growth, high-fashion retailer whose momentum is likely to continue over the next 12 months. The former would cater to deep-value investors looking for a sustainable source of passive income, while the latter would be best suited to young growth investors looking to catch a near-term dip before a potential next leg higher.

Great-West Lifeco

Great-West Lifeco is one of the more underrated Canadian insurers out there. The Winnipeg-based firm has been on an incredible run, surging nearly 29% year to date and 48% over this past year. After recently touching an all-time high for the first time since before the Great Financial Crisis, shares have begun to show signs of waning momentum. The company is firing on all cylinders, yet its stock is unlikely to be spared from the next broader market pullback.

For the second quarter, Great-West Lifeco clocked in total base earnings of around $826 million, an impressive 17% year over year. Indeed, Great-West’s highly favourable period is due to come to an end. Still, I find the macro backdrop to be attractive such that GWO can continue to build on its strength over this past year. At just 11.1 times trailing earnings, investors are getting strength and a hefty dividend on the cheap!

Aritzia

Aritzia is a different type of value. The fast-growing retailer has done well expanding south of the border. As pandemic headwinds begin to fade, I don’t think it’s too far-fetched to think that Aritzia, a mid-cap stock, could grow to become one of the TSX’s leaders over the next decade and beyond. Canadians may be all too familiar with the brand. But as the company pushes into new markets, I think the brand could evolve such that the magnitude of brand affinity is comparable to the likes of a Lululemon.

In any case, ATZ stock got punished by 3.3% on Wednesday. After having soared 62% year to date, the pullback was a long time coming. Should the pullback intensify, younger, growth-savvy investors should think about initiating a position, perhaps below the $40 mark.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joey Frenette has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Lululemon Athletica.

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